The NZX-owned Smartshares has confirmed it will partner with the world’s biggest fund manager to roll out a new batch of exchange-traded funds (ETFs).
As reported here last month, the NZX has struck a deal with the US$6.3 trillion BlackRock to badge a range of US-based manager’s iShares ETFs under the Smartshares banner.
Smartshares chief, Hugh Stevens, said the NZX would list eight iShares ETFs in June including five environmental, social and governance (ESG)-tinged products.
As well as the ESG funds – that cover global, US, Japan, Europe and emerging markets – the NZX-fronted iShares suite includes two ‘thematic’ funds (based on automation/robotics and healthcare trends, respectively) and a pure passive international bond product.
Stevens said after listing the iShares range in June, NZ investors would be able to get direct local access to ESG-compliant ETFs for the first time.
“It will also be interesting to see the demand for the thematic funds in NZ,” he said. “The underlying thematic ETFs have been growing well offshore.”
The final member of the new Smartshares octet – an international fixed income ETF tracking the Bloomberg global bond index (NZ dollar hedged) – would complement the existing NZX-listed offshore bond product, Stevens said.
NZX’s fund shop offers a global bond ETF that is actively-managed by fixed income mega-firm PIMCO. According to the Disclose database, the PIMCO-managed Smartshares fund boasts about $200 million under management.
In a release, head of iShares Australasia, Christian Obrist, said: “We see more and better uses of ETFs being fuelled by demand from investors themselves, who are continually looking for innovative ways to access new exposures, achieve portfolio outcomes and make progress toward their investment goals.”
The Smartshares fund suite will expand to 31 once the new BlackRock products hit the shelves. Vanguard, which vies with BlackRock for global funds management scale, backs most of the current Smartshares set excluding the five foundation Australasian ETFs.
Smartshares reported over $2.7 billion under management as at the end of March this year, of which roughly $1.8 billion was sourced via related KiwiSaver and superannuation business, SuperLife.
Off-the-rack Smartshares ETFs vary in price from 0.33 per cent to 0.75 per cent depending on the asset class. While Stevens could not reveal the Smartshares iShares fees he said they would be “cost-competitive”.
He said an in-house analysis had shown Smartshares provided the cheapest avenue for NZ-based investors to access global ETFs.
While the sticker price for underlying ETFs could be as low as 4 basis points (bps), Stevens said NZ retail investors would pay much more going direct – even via the new breed of discount online providers – after taking into account brokerage, custody and currency expenses (with the latter probably the biggest drain on returns).
For example, the Kiwi Wealth-owned Hatch, which offers investors a platform to invest in US shares including ETFs, charges a 50 bps spread on foreign exchange (FX) as well as other fees.
Last year, Hatch head, Kristen Lunman, said most investors were using the platform to access big-name US listed companies rather than ETFs.
Interestingly, a similar Australian-based US share-trading platform opened up to NZ investors last month. The Sydney-headquartered Stake uses the same US online brokerage firm (DriveWealth) as Hatch but operates a different pricing model.
Rather than charging brokerage, Stake takes its cut out of client cash holding account interest and an FX spread of 70 bps (shared with currency exchange partner, OFX). By contrast, Hatch charges brokerage fees (minimum US$8) in addition to the FX spread and other regulatory expenses. Since launch late in 2018, Hatch has processed about $13 million in trades, the group said last week after winning an ‘innovation excellence’ award from ratings house Canstar.